Mr. McGuire recently presented at the LBMA 2010 Conference, speaking on why big pension funds should now consider adding gold to their portfolios as an asset class. Running through these numbers might make even Peter Schiff's eyes bug out.
McGuire points out some of the reasons for the attraction to gold as follows (italics, mine):
- Pension funds currently have very small gold holdings (some may have none at all)
- Gold has a proven diversification benefit
- Gold provides reduced portfolio volatility (also see World Gold Council post)
- Gold appreciates when other assets don't
- Gold is still regarded a commodity, but it is behaving differently (like a solid currency?)
- While Gold ETFs have exploded the market remains "minuscule".
- Attitudes toward gold as an asset are improving dramatically. (and ever more quickly)
If the world's largest pension funds and insurance companies made room in their portfolios for "N" percentages of gold, one could only believe that this demand would drive the price of gold much much higher.
From the McGuire presentation, we see that global pension funds now total $24 Trillion in assets. (Paying no attention to the additional $18 Trillion in insurance funds for this discussion.) Hypothetically, if the average of all the gold added to these these funds in the next years increased just by one-half-of-one-percent (.005%) of the funds value that would require over $100 Billion in yellow metal (or around 3000 metric tonnes).
First one to the order desk gets the best price!
If pension fund managers were really
Where gold goes silver goes too. Silver prices would also be dramatically influenced by pension fund purchases of gold, as it is always factored along with the gold equation. This is esp. the case since one hundred million ounces of gold (3000 metric tonnes) might require a few "temporary" supply chain "gaps" to be filled in the bullion markets. If it were even physically possible to deliver that amount of gold (without the price going to 5 digits), at one half of one percent of total fund assets, combined pension fund gold holdings would knock the IMF out of the number 3 world gold holding slot, leaving only Germany and the US government with more tonnage (if you believe the US still have any that is not tungsten grilled cheese).
Let's see the COMEX deliver on those orders, or better yet: let's see the JPM price suppression team short to cover them.
Pension Funds! Chirp! Gasp!
You can download a PDF of the McGuire LBMA conference presentation here, or by clicking on the title of this post.
The MUST WATCH Financial Times interview with Mr. Shayne McGuire is here: FT's video interview with Shane McGuire